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Strategic Planning

Case Scenario - Pending Layoffs

Polar Health's CEO, Christina Popescu, has said that the company needs to improve its short-term profitability and reduce overhead costs. She tells her managers that the company has decided to outsource about half of its sales functions to a much larger and more specialized sales firm, Results Now. That company has promised to deliver significantly better sales results for one third of the current cost - all within the first year of its contract with Polar Health. Given the current sales budget for Polar Health, Popescu says this decision will save the company more than $2,000,000 annually.

Popescu sets up a meeting with Michelle Wong, the senior manager of marketing and sales. Since Michelle's department will bear the brunt of the layoffs, Christina wants to personally talk with Michelle about the strategic importance of this key decision. During their meeting, Christina tells Michelle that half of her sales staff will have to be laid off in the next two months.

Christina tells Michelle that the decision to outsource Polar Health's sales function is critical to the company and that she must not disclose news of this strategic decision to anyone. Any leaked information could endanger the strategic short-term competitive advantage of the company. Stunned by this news, Michelle promises to abide by Christina's request. Once Michelle returns to her office, she begins reviewing the list of employees she might need to fire, realizing that she is facing a very tough decision.

The very next day, Michelle overhears Basil Yancades, one of the mid-level producers on the department's sales team, cheerfully telling the department that he and his wife just learned that they are expecting a child and are going to close on a much larger home in another week. Basil has been earning a good salary every year, and in the last few years has averaged a 5-7% bonus for often making his quarterly sales goals. Just a few months ago, Basil told Michelle that he had decided to purchase a little more house with the knowledge that his increased sales of health supplements would increase his take-home pay.

Basil is also Michelle's close friend and colleague. They have known each other since the company began over 15 years ago and have been through many good and tough times together. Michelle is concerned about what Basil is planning to do since he could be laid off in the next two months. Worse, this afternoon, Basil walked into Michelle's office and asked her if the rumor is true that layoffs are coming.

Critical Analysis

Apply what you have learned from your course readings and assignments to your detailed analysis for each of the following 4 questions. Support your position by identifying the unit concepts from which you draw for your responses, citing references from unit readings using APA 6th edition format. Clearly label and answer each question individually.

1. What are the short-term results as well as the long-term consequences of these pending layoffs?
2. As a manager who embraces the covenantal business ethic, how should Michelle approach these opposing goals?
3. Should Michelle say anything to Basil? What, if any, information can she reveal?
4. Is there anything in your text readings that can help Michelle work through the problem? What, if any, criteria should Michelle use to decide which sales people stay and which are let go? (Hint: Can there be a compromise in this situation?)

Solution Preview

1. What are the short-term results as well as the long-term consequences of these pending layoffs?

The short term results of the pending layoffs are that you will have many disgruntled employees. Furthermore, initially sales may falter because of the lack of knowledge provided by the new sales team from Results Now. The employee and sales team of Results Now may not have the individual knowledge and connection with many of the suppliers and customers that much of the Polar Health employees do. This could cause a decline in sales in the short term.

In the long term, it seems that it will save Polar Health a substantial sum of money. It will be hard to predict whether this savings will be counter balanced by the possible loss in initial sales due to the lack of connection between employees of Results Now and customers of Polar Health.

It seems from the scenario that the decision to lay off employees of Polar Health is critical to the company being successful and proceeding forward at all. Therefore, I think the long term results for Polar Health will be successful. However, on a short term basis I think that the company may suffer some financial setback if the employees of ...

Solution Summary

This solution provides an explanation for strategic planning in a case scenario provided.

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